Eurostat data for 2025 show that EU imports of several processed mineral inputs are heavily concentrated in China, while the Carbon Border Adjustment Mechanism (CBAM) applies only to selected industrial goods. The resulting gap between dependence on Chinese supply and the mechanism’s current product scope is relevant for both industrial sourcing and carbon regulation. China accounted for 92% of EU magnesium imports by value in 2025. It also supplied 77% of EU gallium imports and 68% of ferro-tungsten imports.
China’s role extended beyond those categories. It supplied 43% of EU natural graphite imports and was also the EU’s leading supplier of rare-earth products. These figures point to a high level of reliance on Chinese processing and supply in multiple mineral markets. At the same time, CBAM does not cover all critical materials used by European industries.
CBAM applies to selected goods, leaving some critical minerals outside
Under the current framework, Chinese aluminium imports, covered steel products and certain ferroalloys face CBAM requirements when they enter the EU market. By contrast, magnesium, gallium, graphite supplies, rare-earth products and ferro-tungsten are among the critical materials outside the mechanism’s current scope. CBAM therefore addresses only part of Europe’s dependence on Chinese processing capacity. The coverage limits how carbon requirements apply across different mineral inputs.
The critical materials outside CBAM’s scope support multiple downstream industries. Aerospace and defence manufacturers use specialised metals and rare earths, while graphite is important for battery production. Magnesium, ferro-tungsten and other processed materials also serve steelmaking, electronics and renewable energy technologies. As a result, supply-chain disruptions involving these inputs could affect several sectors at once.
Different CBAM exposure changes incentives for Chinese producers
The mechanism creates different compliance requirements depending on which goods are exported to the EU. An aluminium smelter supplying the European market must account for emissions associated with its covered products. Under the current framework, producers of magnesium metal, rare-earth oxides or natural graphite generally do not face the same direct carbon-border mechanism. This means exposure to CBAM differs across parts of the supply chain.
The different treatment can translate into different market incentives for emissions reductions. For manufacturers exporting covered goods, reliable emissions reporting and lower carbon intensity can matter for competitiveness in Europe. Producers of materials outside CBAM’s scope face different market pressures even if their products remain important for European industrial supply chains. The mechanism can influence carbon performance for covered imports without automatically changing practices across all critical-minerals processing.
Processing capacity and refining networks shape supply positions
Europe’s dependence on China extends beyond extraction of raw minerals. Processing capacity, refining expertise and established industrial networks give Chinese suppliers a strong position in markets where alternative sources may be limited. CBAM can influence the carbon performance of covered imports entering the EU. However, it does not automatically drive equivalent changes throughout the broader critical-minerals supply chain.
This distinction matters when considering how carbon policy interacts with industrial sourcing constraints. Carbon requirements under CBAM are tied to specific covered goods rather than to all inputs used in European manufacturing. Meanwhile, concentration in processing capacity can persist for materials that remain outside CBAM’s product scope. The policy effect therefore depends on which parts of trade are included in the mechanism.
Diversification measures extend beyond carbon pricing
Carbon pricing cannot replace raw-material diversification according to the source facts presented here. Extending CBAM to more products could change trade incentives but would not immediately create new mines, processing plants or commercially viable substitute technologies. Alternative supply chains require investment, infrastructure, skilled labour, access to energy and long-term demand commitments. Establishing competitive capacity for specialised minerals can take considerable time.
The Critical Raw Materials Act (CRMA) and related industrial policies are described as important elements of the EU strategy in this context. International partnerships can help diversify sourcing, while recycling can reduce reliance on newly extracted materials. Strategic stockpiles and procurement arrangements can also strengthen resilience against supply disruptions. These measures address a different issue from CBAM, which is designed to address emissions and carbon-leakage risks associated with covered imports.
A proposed downstream extension could broaden CBAM-linked reporting
The evolving EU carbon-border framework is also relevant to Chinese manufacturers beyond goods already covered. A proposed extension to certain downstream goods from 2028 could bring additional industrial equipment and fabricated products within CBAM’s scope. Any change would depend on the final scope and implementation details of that proposal.
If implemented as described in the source facts, the extension could make the carbon intensity of steel and aluminium used in goods manufactured for the EU more important. Suppliers with reliable emissions data and demonstrably lower-carbon inputs could be better positioned than competitors relying on default emissions values under such requirements. The proposed change would not by itself resolve Europe’s reliance on Chinese supplies of critical materials that remain outside CBAM’s current scope.
Carbon policy interacts with processing capacity and supply security
The broader strategic competition between China and Europe is increasingly shaped by carbon policy, processing capacity and supply-chain security. China’s position draws partly on depth of its processing industry and its role in supplying materials used in advanced manufacturing. Europe is seeking to combine carbon pricing with efforts to develop alternative sources and reinforce its domestic industrial base.
CBAM changes competitive conditions for selected imports, particularly covered steel and aluminium products, but its reach remains limited where European reliance on Chinese suppliers is especially pronounced. The policy challenge extends beyond whether to expand the carbon border toward how climate measures align with investment, recycling, strategic procurement and diversified sourcing. Reducing emissions associated with covered imports will not necessarily reduce vulnerability to concentrated supplies of critical minerals without that broader industrial framework.